Plans for simple single VAT rate lose out
Bangladesh is to back track on original plans for a single VAT rate simplification, and instead reduce from six rates to four. The new rates will be: 15% standard; 10%, 7.5% and 5% reduced rates.
Only the 15% VAT input invoices may be creditable against taxpayers own output VAT. This would mean the level of tax incidence my reach over 37%. Many products under the existing 5% rate will become more expensive. There is a VAT registration threshold of Tk 50 lakh.
To help drive compliance, Electronic Fiscal Devices (cash registers with automated invoice reporting) will be introduced.
The current VAT rates are:
- 15% Standard rate
- 10% reduced: rented retail; advertising
- 7.5% reduced: machinery; paper
- 4.5% reduced: professional services
- 2.4% pharmaceuticals
- 2% reduced: medical
- 1.5% reduced: land
- 0% nil-rated
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